This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Here’s a departure from my usual Trader-X style dummy play. I’ve watched stocks gap up and surge over and over for days lately, like Mamma.com Inc. (NASDAQ: MAMA), all the while shaking my head at the idiots who are buying:
Well, call me an idiot, but I decided to try to catch one of these, and not as a daytrade, but holding overnight. So I opened a position in Onstream Media Corp (NASDAQ: ONSM). I got in at 3:59 PM, just before the close (20 shares, baby! Livermore, eat your heart out…). Here’s the chart of my entry. It’s a tick chart, so each candle represents 30 ticks:
Another note about this chart: I’ve got volume by price plotted there, so you can see the blue horizontal lines showing at what price the volume took place. The orange bars are 90% markers (almost 2 standard deviations in a normal distribution), so 90% of the day’s volume happened within the two orange bars; transactions outside of this should be outliers. Also, the yellow bar is the midpoint, so half the volume was above that price and half below biggest volume price point of the day. I’ve been watching this lately to see if there is some significance, but I have no real observations yet.
Why did I decide to buy?
1. I saw tons of buy size on Level II, which looked like buying support at the opening price near $3.00. Was I scammed through LII games, or is the support really there? I’ll find out tomorrow…
2. I’ve ended up buying tops and selling bottoms usually, and I wanted to be a trading contrarian on this one, so I stepped in to buy from the daytraders who were getting out before the close. Am I an idiot or a genius? I’ll find out tomorrow…
3. My entry was still within my 90% volume marker, so I should be buying cheap according to the day’s average of value. Bargain or bagholder? Tomorrow again…
4. Zecco makes it cost effective to play small trades like this one, so the stop I defined at $2.60 (midpoint of the gap-up this morning) and my 20 share size puts my R at just about $13. What if it tanks to yesterday’s close of $2.13? then I’m out $22, which is not much more than I’d throw away on commissions in the past for a more “rational” trade.
Comments or analysis are encouraged, heckling is tolerated, and stinging criticism will send me to cry under my desk…
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| MAMA |  |  |  |
| ONSM | | | |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
December 21st, 2006 at 3:13 pm
What is this “holding overnight” that you speak of? Does it require a special brokerage account?
December 21st, 2006 at 3:23 pm
The only thing I hold overnight is my wife ;)
December 21st, 2006 at 3:27 pm
Trader-X and Zoomie made me lol.
December 21st, 2006 at 3:34 pm
Yes Zoomie, and that is usually against HER will!!!
I once held SIRI overnight. I don’t like to talk about it though.
December 21st, 2006 at 3:47 pm
Ha. I have no comeback. Darn.
December 21st, 2006 at 3:50 pm
You could have said something like “Yeah, but when I hold YOUR wife it is never against her will…she always seems to like it.”
But I digress - sorry for ruining a perfectly good post. Except for that whole “holding overnight” thing, that is.
I am going out for holiday Mexican food. Have a good night all.
December 21st, 2006 at 4:10 pm
Trader X,
Oh, I thought you had a boyfriend.
I am going out for Mexican food too. Which is not hard ’cause I live in Mexico.
December 21st, 2006 at 6:09 pm
@Trader-X: I tolerate your heckling. ;-)
But ‘SIRI’ously, I’m only holding overnight because I’m maxed out on my 3 daytrades per 5 business days–I’m undercapitalized, remember? That, and I don’t have the joy of being able to trade full time yet, so my screen time is limited :-(
December 21st, 2006 at 7:19 pm
you all may hold them overnight, but thanks to trader-x’s advice, I try to hold them all during the day if they should venture near my supermarket.
It seems like there was a fair amount of resistance/support at your yellow line earlier. From 15:51 on, it looked like it fell through yellow line sharply, rose up to it, and then just as you were buying fell back away. I’m not sure I would have bought in unless a candle could close back above the yellow line resistance.
While I’m being negative, I’ll also say that, to me, the chart from 13:37 on looks like a sloppy head-and-shoulders that broke through and re-tested the downsloping lower trendline.
Those could be bad signs for a long position intraday, but may be meaningless tomorrow. Unless it’s printing unusual volume again, you might be at the mercy of the initial market tone. An early push back toward 3.40 would give that yellow line area a chance to re-establish itself as support.
December 22nd, 2006 at 5:08 am
I watched MAMA pre-market yesterday go bonkers then take-off at the open. After I was severely scorched in ESCL the day before, I deciced to short into MAMA early on. Thought I’d made a bad call, which is about the norm for me, when the bottom fell out of it. I covered very early, but still made out very well.
Closed up to go shopping before I did something stupid, like get back in, which of course I realized later on in the day as it marched back up is what I should have done.
I’ve been trying to learn this intra-day resistance/support thing and I’m not sure it’s there. Least not from what I witnessed in ESCL, but I’d love to hear others opinions.
December 22nd, 2006 at 9:22 am
Must have gotten a little nervous at the open this AM, but as I write this looks like you’re up about 3.5%.
How’s your “within an ATR of a 30 day high” screen working for you? Looks interesting, similar in some ways to a screen I run.
December 22nd, 2006 at 9:33 am
@doink: It works very well, but I have been considering some changes. Mostly I think it misses some opportunities by demanding so much historical intraday movement in the stock. Often the big intraday movement doesn’t come until the after a major breakout. I thought I might start scanning for recent range contraction (a la NR7 type of thing) instead. dunno.
Not sure if you knew you were talking to two different people, but if not, it was ExEngineer’s trade, so I don’t get nervous about it! We got the push to the 3.40 area I was hoping we’d get, but it came later than I thought it would. As I write this, looks like we’re about to find out whether it will hold as support, or not. Good luck, Ex!
December 22nd, 2006 at 10:07 am
[...] Here’s my analysis: My buy point was too high. I should have waited until today and bought near the $3.00 floor. Holding overnight was a SIRIously flawed plan. ;-) I am happy with my read of this morning’s price action though, and my decision to stay in through the first pullback after the breakout. I watched Level II during all of this, but I can’t really make heads or tails of it. It seems like the price moves towards the big size, rather than the sizes moving the price. Anybody have any LII comments? Anyway, this turned out to be a Rumsfeld play: I had no exit strategy. I had no profit-taking target other than “the most I can get”, so I was doomed to get taken out by a stop of some sort. If my buy point was lower I would have had more margin to play with, but after the $3.40 support failed, I sold at market so I wouldn’t get stuck with a loss. Any insights or tips on exits for this trade are requested! [...]
December 22nd, 2006 at 6:52 pm
“Often the big intraday movement doesn’t come until the after a major breakout.”
Yup.Sure does.
I was in MAMA a few times this week,ONSM,ESCL and today,”all the while shaking my head at the idiots who are buying”,ZICA,feeling like an idiot i went in after it ran 30% only to watch it rocket launch.
Call it whatever you want but it works for me.
Now after MAMA gets hit hard today,I’ll wait on it,just like I’ll wait for some 20k avg. volume “nowhere” stock like ZICA next week to come outta the blue to go crazy
December 26th, 2006 at 9:14 pm
ZICA again today,catching it as it goes green from deep red,a great 2 day surge.
Probably over before noon tomorrow,but was fun while it lasted.
Anyway i’ll watch at open to see the action,if it opens red i’ll wait again for green,if gaps up …. oh well,there’s always another around the corner.
Wishing all a safe and Happy New Year!
December 27th, 2006 at 12:56 pm
Muddy, Do you have a blog or a site of your own? I’d like to hear more about your trades…
December 27th, 2006 at 5:10 pm
Hi Ex,
Yes it’s Green on the Screen.
We also have a website though since we went to live chat it’s rather dead but there are files in there that can be read,including my favorite list of stocks i like to trade when the conditions seem right.
http://finance.groups.yahoo.com/group/StockFetcher/
On the blog there are usually 3 or 4 of the latest logs from our live trading chat.
Thanks for asking,Muddy